A determination this month from the Bankruptcy Court in Manhattan (SDNY) may have a significant effect on the marketplace for education loan securitizations. Education loan asset-backed securities (SLABS) are unsecured, but market individuals typically assume that the student that is underlying aren’t dischargeable in bankruptcy. A brand new ruling by the principle judge of this SDNY’s Bankruptcy Court challenges this presumption.
In Rosenberg v. N.Y. State Degree Services Corp. (Jan. 7, 2020), Chief Judge Cecelia Morris discharged the student that is debtor’s and vigorously pressed straight straight back in the “myth” that it’s “impossible to discharge student education loans. ”
The debtor is a Navy veteran whom graduated from legislation college in 2004, but worked as legal counsel briefly that is only. He missed fairly few re re payments over 10+ years before filing for bankruptcy, of which time he reported negative income that is monthly. Their education loan financial obligation surpassed $220,000.
Chief Judge Morris discovered that the debtor had shown the “undue difficulty” required by statute and came across the Second Circuit’s three-part test for release, which goes back to 1987. The court penned: “For a variety of petitioners like Mr. Rosenberg, who have been away from college and fighting education loan financial obligation for quite some time, the test is pretty straight-forward and simple. Continue reading Pupil Loan Discharged in Bankruptcy – simply a Blip, or something like that larger?